Insurance can give you an extra layer of financial protection, but you have to pay premiums to keep your policy active. While it’s possible to use a debit card to pay for your insurance policy, some people may prefer using a credit card instead.
After all, using a credit card for purchases offers many benefits such as credit building and rewards. That said, can you pay insurance with a credit card?
Many insurance companies do allow credit card payments for premiums, which can be a convenient option to earn rewards points or take advantage of a grace period before interest accrues. However, some providers may charge a processing fee for credit card transactions, so be sure to check if any extra costs apply.
We’re going over everything to know about paying insurance with a credit card – whether it’s car insurance, health insurance, or even home insurance.
MoneyLion can help you explore a wide variety of credit card options tailored to different needs and preferences.
How paying for insurance with a credit card works
Most insurance companies have payment policies that determine how and if you can make payments using your credit card. It’s best to review your insurer’s website or talk with a representative to see how you can make insurance payments with a credit card.
Insurance companies will typically make the process straightforward. You can select the payment method for your insurance policy and opt to use a credit card. Policyholders can use their credit cards for various policies, like car insurance, health insurance, and other insurance products.
E-commerce and the rise of insurance apps have made credit card payments more common. Most insurers will let you pay for your policy with a credit card. You can use a credit card to make payments for any type of policy, but some insurance companies may not allow credit cards as a payment option.
Can you pay car insurance with a credit card?
Generally yes, you should be able to pay car insurance with a credit card. Most major auto insurance providers accept credit card payments for premiums online, over the phone, or through mobile apps.
However, every insurance company will have its own policies, rules, and restrictions. It’s best to check in with your provider for the full picture. Make sure to ask about any credit card processing fees you might have to pay or if any other costs apply.
Can you pay life insurance with a credit card?
When it comes to paying your life insurance premiums, plastic might be a feasible option. Most life insurance carriers give policyholders the flexibility to whip out their credit cards for premium payments.
Again, you’ll want to keep an eye out for any pesky processing fees an insurer may tack on for credit card transactions. And as always, try to pay off those premium charges promptly to steer clear of interest accumulating on your outstanding balance.
4 Benefits of paying insurance with a credit card
Are you considering credit card payments for your insurance policy? Credit cards present policyholders with several benefits.
1. Take advantage of cashback and points
Most credit cards have reward programs that give you points or cashback on every purchase. You can accumulate points and get some money back from every premium payment. Since you planned to spend money on your insurance policy anyway, you might as well get some rewards for it.
2. Flexibility
You don’t have to repay credit card debt right away. You can gradually repay it leading up to the bill’s due date. Credit cardholders can get into serious debt if they only make the minimum payment, but getting your balance back to $0 before the end of each month will protect you from high interest rates.
This protection lets you benefit more from the flexibility of credit card payments. You don’t have to worry if your bank account doesn’t have enough funds to support your debit card payment.
3. Build credit
Credit cards allow you to help improve your credit score if you make on-time payments. Payment history makes up 35% of your credit score, and each insurance payment could give you a few points. Those extra points can help you qualify for higher loan amounts and lower interest rates.
Even if you don’t plan to borrow money, building credit is still important. Most landlords will look at your credit report when you submit your tenant application.
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4. Potential for discounts
Insurance companies want to ensure policyholders make on-time payments. They want predictability and may offer a discount if you set up automatic payments with your credit card. Discounts vary for each insurance provider.
3 Disadvantages of paying insurance with a credit card
While your credit card can cover insurance payments and provide numerous benefits, you should know the risks before getting started. Here are some reasons to be wary of paying insurance with a credit card.
1. Interest charges
Credit cards have high interest rates, and they are also variable rates. Those rates can go up if the Fed raises interest rates or if you miss payments. Your credit card balance will increase significantly if you wait to pay it off.
2. Potential for racking up debt
It’s easy to spend with a credit card. Debt can rack up quickly before you think about how you’ll pay it off. The high-interest rate will cause the debt to snowball, and it can put you in a challenging situation. When repaying your credit card, do not stop at the minimum payment. Although this practice will protect you from late fees, your debt will grow silently.
3. Credit score implications
Racking up too much credit card debt will hurt your ability to make on-time payments. Each late or missed payment will hurt your credit score. A lower credit score translates into higher rates, an uphill battle to get any loan, and other obstacles. Conversely, you’ll be rewarded for on-time payments. If you pay insurance with your credit card and repay the debt before it’s due, your credit score will increase.
Alternatives to paying insurance with a credit card
You don’t have to use a credit card to pay for insurance. You can explore these alternatives to make insurance payments.
1. Checking account or savings account
Insurance companies let you automate premium payments through your checking or savings account. You won’t have to worry about missing a payment and losing out on the policy. However, make sure you have enough funds in your account to make the monthly payments so you avoid overdraft fees.
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2. Debit cards
A debit card connects to your bank account and is a viable alternative to paying insurance. You won’t accumulate debt like you can with a credit card, but you need enough funds in your bank account to cover the transaction.
3. Online payments
You can set up online payments with your insurance company. You can make these payments automatic and link a funding source.
4. Call your insurance provider
Insurance companies give their policyholders various payment options. You may have additional options, such as writing and mailing a check. Policyholders can call their insurance providers to discover their options.
5. Government assistance
The government helps with some insurance payments, depending on your income. If you are in a lower income bracket, you may be eligible for government assistance for your health insurance policy. The government features additional programs that can help you save money in other areas. Getting all of the help you qualify for can make insurance premiums more manageable.
Should I be paying for insurance with a credit card?
Paying for insurance with a credit card can help you build credit and let you access additional rewards like points or cashback. However, leaning on your credit card for insurance premiums can backfire if you let the balance accumulate. Credit cards have high interest rates that make it difficult to climb out of debt. Credit card holders who can pay off their balances by the end of the month are in the best position to use their cards for insurance premiums.
Need help with insurance? Your credit card can get the job done
Credit cards make it easier to buy goods and services, including insurance policies. You can make credit card payments towards your policy so it’s available when you or your loved ones need it the most. You should talk with your insurance provider to discover your options and how to set up an automatic plan.
FAQ
Can I pay for my health insurance with a credit card?
Yes, you should be able to pay for health insurance with a credit card. Most insurers have no problem with you using a card, but you should contact them to verify.
Are there any fees for paying insurance with a credit card?
You won’t have to pay any additional fees if you use your credit card for insurance payments. Insurance companies usually welcome credit cards since you can set up automatic payments. Some insurers even offer discounts if you use a credit card.
Does paying for insurance build credit?
Paying for insurance only builds credit if you use your credit card or a loan. Payment history for loans and lines of credit like credit cards gets reported to the major credit bureaus. However, late payments also get reported and can hurt your score.
Is it better to pay insurance premiums with a credit card or a debit card?
A credit card is better if you can pay off your balance by the end of the month. However, a debit card may be the better approach if you have enough funds in your checking account. Credit cards are convenient financial products, but they also have some of the highest interest rates in the industry.
What’s the best way to pay for insurance?
Paying insurance with a credit card is one of the best choices for people who can pay off their balances in full by the end of the month. You get to build credit and enjoy rewards. A debit card or a checking account may be better for people with sufficient funds who don’t want a high interest rate.
Can you pay homeowners insurance with a credit card?
Typically yes, most homeowners insurance companies allow policyholders to pay their premiums using a credit card, either online or over the phone.
